cooperate financial management

Remaining Time: 1 hour, 52 minutes, 25 seconds. . Question Completion Status: This Examination consists of five (5) questions. Students should attempt all questions. Each question is of equal value (10 marks) (Your results should be at least up to 4 decimal places) See attached file for the provided list of formulae: 200488 Corporate Financial Management List of Formulae.docx (a) A six-month call option on 100 shares of ABC Company is selling for $30. The strike price for the option is $4. The share is currently selling at $3.80 per share. () Ignoring brokerage fees, what price must the share achieve just to cover the expense of the option? (1 mark) (10) If the share price rises to $4.75 at the time of expiration, what will the net profit on the option contract be? (2 marks) (b) The SWU Company produces a single type of environmentally friendly shopping bag that can be sold at a constant price of $1.50 per bag, Variable cost per bag is $0.90 (regardless of the production volume), and fixed costs amount to $180.000 per year. The firm pays a tax rate of 309%. The company's assets, valued at $625,000, are financed by 40% debt and 60% equity, with the latter in the form of 20,000 ordinary shares (no preference shares are issued). The firm pays annual interest of 8% on its debt financing. (1) Calculate the annual operating break-even level (volume) of bag sales, (1 mark) (1) Calculate the firm's earnings before interest and taxes (EB/) and earnings per share (EPS) at annual sales volumes of 350,000, 400,000 and 450,000 bags. (4 marks) (in) Calculate the firm's degree of operating leverage (DOL], degree of financial leverage (DFL) and degree of total leverage (DIZ) at an annual volume of sales of 400,000 bags. (1+0 5-45 -2 marks) For the toolbar. press ALT+F10 (PC) or ALT+FN+F10 (Mac). B I Y S Paragraph v Arial V 14px 9 U Type here to search